November 06, 2013

FT, don't you get it, there is absolutely nothing so far away from laisser-faire, than capital requirements for banks based on risk weights

Sir, in “Save business from the businessmen” November 6, you write “More intrusive regulation should be reserved for special cases such as banking”, and you refer to “the laisser-faire approach of the past three decades”. Are you out of your mind?

We have bank regulations which, by means of using risk weights, allow banks to earn much higher expected risk adjusted returns on equity on assets that are perceived, ex ante, as absolutely safe, than on assets perceived, ex ante, as risky. And those regulations are de facto capital controls which direct the allocation of bank credit. Have you ever seen regulations so far away from laisser-faire than this?

I am sorry to say it but, FT, when history catches up to this you are certainly going to look like fools.